Stocks Surge By More Than 100 Points

Blue-chip stocks are surging today on the heels of a report about the domestic construction industry. With roughly an hour left in the trading session, the Dow Jones Industrial Average (DJINDICES: ^DJI  ) is up by 119 points, or 0.77%.

The Commerce Department released data (link opens PDF) this morning showing that construction spending increased by 0.5% last month to a seasonally adjusted annual rate of $874.9 billion. While this soundly outperformed the same statistic for April, when construction spending improved by only 0.1%, as my colleague Justin Loiseau noted, it nevertheless came up slightly short of the 0.6% consensus estimate.

Far and away the best news from the release was what it suggested about the housing sector, which, by almost every indication, is continuing to recover. According to the Commerce Department's estimate, spending on residential construction grew by 0.5% over April and an astounding 5.4% over the same month last year.

This same trend was on display last week with the release of earnings from Lennar (NYSE: LEN  ) and KB Homes (NYSE: KBH  ) , two of the nation's largest homebuilders. Lennar reported a 36% year-over-year increase in home deliveries and a 55% uptick in its backlog for the three months ended May 31. And KB Homes said that its deliveries and backlog shot up last quarter by 39% and 19%, respectively, over the same time period last year.

Coupled with the positive news from the government, it's little surprise to see shares of most homebuilders heading higher today.

Also out today was a better than expected reading about the state of the manufacturing economy. The Institute of Supply Management's manufacturing activity index came in at 50.9% for the current month, compared to 49% in May -- a reading above 50% indicates expansion while anything below that is indicative of contraction.

On the heels of this news, the Dow is being led by key manufacturing stocks. As I write, for example, its best-performing component is United Technologies (NYSE: UTX  ) , the manufacturing powerhouse responsible for brands like Otis elevators and Sikorsky helicopters. The other thing going for United Technologies is that it's a dividend stalwart, to steal my colleague Dan Dzombak's phrase, that's raised its payout consistently and now yields a respectable 2.3%.

Finally, the worst-performing stock on the blue-chip index is Intel (NASDAQ: INTC  ) , which is down by 1.2% in midafternoon trading. At the end of last week, the chipmaker's new CEO, Brian Krzanich, said that the company would delve deeper into mobile-chip making. Discussing why it hadn't done so sooner, Krzanich acknowledged that "[as] companies get bigger and more and more successful, accepting these big changes gets harder. There was a basic fundamental flaw in that logic."

Discover the Motley Fool's top stock for 2013
The Motley Fool's chief investment officer has selected his No. 1 stock for this year. Find out which stock it is in the special free report: "The Motley Fool's Top Stock for 2013." Just click here to access the report and find out the name of this under-the-radar company.


Read/Post Comments (0) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2518920, ~/Articles/ArticleHandler.aspx, 9/30/2014 8:31:12 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement